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Morgan Stanley Survey: The Market's Least Favorite Airline Is…

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Morgan Stanley Survey: The Market's Least Favorite Airline Is…

In a report published Tuesday, Morgan Stanley analyst William Greene discussed feedback he had received to asking investor opinion which airline stock has the least upside.

According to Greene, the responses were "fairly diverse" but Virgin America Inc (NASDAQ: VA) was a standout. The airline received 33 percent of the vote has the company has seen competitive pressures in the Dallas/Fort Worth and Transcon markets of late.

Hawaiian Holdings, Inc. (NASDAQ: HA) ranked second (19 percent) with investors as the company has experienced headwinds from foreign exchange rates, declining fuel surcharges and elevated capacity additions given its "significant" exposure to the Pacific region and North America-Hawaiian markets.

JetBlue Airways Corporation (NASDAQ: JBLU) tied for third (14 percent) despite an approximate 38 percent year-to-date return due to strong unit revenues relative to peers. However, risk remains ahead surrounding the company's execution of upcoming revenue/cost-saving initiatives.

Related Link: Over The Next 12 Months Airline Stocks Will Be 'A Lot Higher,' And Here's Why

Southwest Airlines Co (NYSE: LUV) tied for third (14 percent) as investors are concerned that its valuation on a 2016 EV/EBITDA basis remains "elevated" compared to peers at approximately 5.5x.

Alaska Air Group, Inc. (NYSE: ALK) ranked fourth (10 percent) as the ‘Battle for Seattle' continues with elevated capacity additions that are expected to continue through the summer.

Allegiant Travel Company (NASDAQ: ALGT) ranked tied for last (5 percent) as the an ongoing labor uncertainty and growth stimulated by low fuel remains a risk that could lead to negative earnings per share revisions if a labor deal is finalized earlier than expected and/or fuel continues to rise.

United Continental Holdings Inc (NYSE: UAL) also ranked last (5 percent) as its exposure to weak international and energy-related markets have weighed on unit revenues.

Of note, American Airlines Group Inc (NASDAQ: AAL), Delta Air Lines, Inc. (NYSE: DAL), and Spirit Airlines Incorporated (NASDAQ: SAVE) received no votes. Greene noted this may imply a relatively attractive risk/reward profile for these names.

Latest Ratings for VA

DateFirmActionFromTo
Dec 2016DowngradesNeutralUnderweight
Oct 2016MaintainsHold
Oct 2016UpgradesUnderweightNeutral

View More Analyst Ratings for VA
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Posted-In: Airliners Fuel Prices Morgan Stanley William GreeneAnalyst Color Travel Analyst Ratings General Best of Benzinga

 

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